Price strategies and salesforce compensation design with overconfident sales agent

Salesforce compensation and pricing decisions have invoked the interest of several academicians and practitioners for a long period of time. However, dilemma of whether the pricing decisions should be made by the firm or delegated to the sales agent, especially the overconfident agent, is still unexplored. This study tries to investigate the problems associated with this dilemma by conducting a thorough study of the scenario, it studies a supply chain that the rational manufacturer hiring an overconfident sales agent to sell its products, the agent might overestimate the demand, or underestimate the variability of the demand. These behaviors are characterized as ability-based and precision-based overconfidence respectively. The models are designed for centralized pricing and delegated pricing settings, and the sensitivity analysis are conducted. Moreover, comparative studies have also been conducted to highlight the impacts of the two types of overconfidence on the compensation decisions under different pricing strategies. It was found out that, the manufacturer favors centralized pricing, while the sales agent prefers delegated pricing. The final decisions of both sides deviate considerably from the rational scenario, overconfidence prompts the agent to exert more efforts, which ultimately enhances manufacturer’s profits that the manufacturer should hire a more overconfident agent, while not guaranteeing a higher commission rate. Overconfidence leads to the decline of the agent’s actual utility, and the loss amount increases with the overconfidence level. The influences of the both types of overconfidence are substitutable. Managerial insights are also provided for various scenarios and propositions along with numerical illustration of the finding.

Two Major Antecedents of Salesforce Motivation: Salesforce Control Systems and Compensation Plans

Salesforce motivation is important for the success of the organization. Unless and until the salesforce is motivated, the organization will not be able to prosper. There are various factors that are responsible for salesforce motivation. It has been found that out of these many factors, the impact of salesforce control system and salesforce compensation plans is inevitable. Therefore, this study makes an attempt to analyze the impact of these two factors on salesforce motivation by following a review of selected studies from the year 1977 to 2014. Till now, none of the previous studies have analyzed the impact of these two factors on motivation. The review of studies reveals that salesforce control systems and compensation plans should be taken into consideration when motivation of salespeople is talked about as they have an impact on intrinsic as well as extrinsic motivation of salespeople. Based on the findings of the review, a framework is designed and implications and directions for future research are stated.